Absent from the legislation are Kasich's proposals to increase taxes on oil and gas drillers and to expand Medicaid, the state-federal health insurance program, under President Barack Obama's health care overhaul.

The energy tax hike, which Kasich intended to fund income-tax reductions, faced strong and vocal opposition from the well-funded oil and gas industry, which is aggressively exploring newly accessible natural gas and oil stores in shale layers under eastern Ohio.

Meanwhile, many of Kasich's fellow Republicans, who control both chambers of the Legislature, opposed Obama's health law overhaul and the associated Medicaid expansion as an expansion of government.

Kasich told reporters on Wednesday those issues haven't gone away.

"This is not over. The severance tax fight is not over. The Medicaid expansion fight is not over," he said. "We're going to stay on this thing until we get it."

Kasich has the ability to veto line items out of the budget, but no power to add things.

After vigorous debate, Ohio's GOP lawmakers did deliver Kasich a political victory ahead of next year's re-election bid by including income-tax cuts in the bill.

The package reduces the statewide income tax rate gradually over three years, beginning with an 8.5 percent tax cut on income earned in 2013 and moving to a 10 percent tax reduction by 2015.

The income tax cut would be partly paid for by an increase in the state sales tax rate, which would rise from 5.5 percent to 5.75 percent. The tax also would be applied to digital goods, such as e-books and music downloads.

The small business tax break in the bill offers individuals the ability to write off 50 percent of their first $250,000 in business income annually.

The bill also adjusts how Ohio calculates the state's share of funding to public school districts and community schools, incorporating ideas from the administration, the House and the Senate.

The legislation increases the amount schools receive per pupil to $5,745 in 2014 and $5,800 in 2015 and adopts a revised version of Kasich's proposal to create a Straight A grant fund that rewards districts for innovation and efficiency.